LexM/S. INNOVENTIVE INDUSTRLES LTD. versus ICICI BANK & ANR.
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[2017] 8 S.C.R. 33 MIS. INNOVENTIVE INDUSTRlES LTD. v. ICICI BANK & ANR. (Civil Appeal Nos. 8337-8338 of 2017) AUGUST 31,2017 [R. F. NARIMAN AND SANJAY KISHAN KAUL, JJ.) Insolvency and Bankruptcy Code, 2016: A B ss. 7 and 238 - Maharashtra Relief Undertakings (Special Provisions Act), 1958 - Insolvency resolution process - Default by c appellant company in payment of amount due under certain credit facilities obtained from the bank-financial creditor - Insolvency petition by bank against the appellant-defaulter company, to set the insolvency resolution process in motion - Appellants interim application that no debt legally due since its liability stood temporarily suspended under the 1958 Act, for one year, which D was later extended for one more year - Second application that owing to non-release of funds under the master restructuring agreement-MRA, the appellant was unable to pay back its debts - NCLT held that the Code would prevail against the 1958 Act in view of the non-obstante clause in s. 238; and that the corporate E debtor had defaulted in making payments, as per the evidence placed by the financial creditors, thus, the application was admitted and moratorium was declared - In appeal, the NCLAT, held that the Code and the Maharashtra Act operate in different fields and, thus, not repugnant to each other; defaulter company failed to pay debt and cannot derive any advantage from the 1958 Act to stall the F insolvency resolution process uls 7 - On appeal, held: Maharashtra Act cannot stand in the way of the corporate insolvency resolution process under the Code - Non-obstante clause is contained in s. 238, so that any right of the corporate debtor under any other law cannot come in the way of the Code - Thus, the tribunal was correct G in appreciating that there would be repugnancy between the provisions of the two enactments - Judgment of the appellate tribunal · is not correct on this score - Obligation of the corporate debtor was, unconditional and did not depend upon infusing of funds by 33 H 34 SUPREME COURT REPORTS [2017] 8 S.C.R. A the creditors into the appellant company -- Also, the submission taken for the first time that no debt was in fact due under the MRA as it has not fallen due (owing to the default of the secured creditor) is not something that can be countenanced at this stage of the proceedings - Jn view thereof. the tribunal and the appellate tribunal B right in admitting the application _filed by the .financial creditor. Object and scheme - Object of the Code is speeding up of the insolvency process - Code has brought paradigm shift in the law - Entrenched managements not allowed to continue in management if they cannot pay their debts. C Operation and functioning of the Code - Discussed. D E F Constitution of India - Art. - 254 - Repugnancy between Central and State laws - Constitutional principles - Discussed. Insolvency laws - UK Insolvency Laws and USA Insolvency Laws - Discussed. Dismissing the appeals, the Court HELD: 1.1 There is substance in the plea taken by the respondents-financial creditor that the instant appeal at the behest of the erstwhile directors of the appellant is not maintainable. The appellant stated that this is a technical point and he could move an application to amend the cause title stating that the erstwhile directors do not represent the company, but are filing the appeal as persons aggrieved by the impugned order as their management right of the company has been taken away and as they are otherwise affected as shareholders of the company. Once an insolvency professional is appointed to manage the company, the erstwhile directors who are no longer in management, obviously cannot maintain an appeal on behalf of the company. In the instant case, the company is the sole appellant. This being the case, the appeal is obviously not maintainable. [Para 111 [48- G G-H; 49-A-BI 1.2 The Insolvency and Bankruptcy Code of 2016 has brought paradigm shift in the law. Entrenched managements are no longer allowed to continue in management if they cannot pay their debts. (Para 111 (49-B-CI H 1.3 One of the important objectives of the Code is to bring MIS. INNOVENTIVE INDUSTRIES LTD. v. ICICI BANK 35 the insolvency law in India under a single unified umbrella with A the object of speeding up of the insolvency process. The scheme of the Code is to ensure that when a default takes place, in
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